February 26, 2014 2:24pm PT by Eriq Gardner
Major League Baseball Says Antitrust Exemption Bars Challenge to Its TV Deals
On Tuesday, Major League Baseball, Comcast and DirecTV took turns getting ready for the upcoming baseball season by asking a federal judge in New York to give them a win in a class action lawsuit that raises antitrust concerns over sports broadcasts.
The plaintiffs in the class action lawsuit are upset at the way professional sports leagues carve up territorial rights with TV partners and then sell out-of-market packages to cable and satellite companies. The suing individuals contend that as a result of conspiratorial agreements, consumers must pay egregious prices for these games lest they be confronted by blackouts on MLB's digital service. The lawsuit has also been consolidated with a similar action against the National Hockey League.
In December, 2012, the legal challenge to TV sports became potentially game-changing upon U.S. District Court Judge Shira Scheindlin's refusal to dismiss the lawsuit. At the time, the judge wrote that the plaintiffs had "plausibly alleged that they are the direct victims" of preventing individual teams from competing to sell their games outside their home territories.
MLB is going to the plate again with a new summary judgment motion.
Among other things, the league is touting its ballyhooed antitrust exemption.
Ever since the Supreme Court in 1972 upheld MLB's antitrust exemption in a dispute over the league's reserve clause -- a restriction that once prevented unfettered free agency -- legal observers have debated how far the exemption extends. Many observers believe that the Supreme Court limited its scope to the reserve clause, or at least labor matters, but MLB believes it goes well beyond that to cover "the business of baseball," which the league now tells Judge Scheindlin "includes its territorial league structure and live video rules."
In a letter to the judge (read here), MLB says the way it has established its TV system is good for the game. The league says it not only allows them to grant national networks "meaningful, exclusive" rights, but that it serves fans by supporting a "healthy, competitively-balanced league" and "incentivizing the creation and distribution of live video of more games of more clubs." Since adoption of its territorial system, MLB says there's been an "explosion of live baseball programming."
MLB adds, "In a complete inversion of the antitrust laws, Plaintiffs seek to wipe-out the territorial structure that has produced all of this output to fans of every club and replace it with nothing but a hope and a prayer that some fans of some clubs might get some (unspecified) additional 'choice' at some (unknown) price."
Comcast argues that that there is no evidence that its regional sports networks have entered into horizontal agreements with other RSNs to accept established territorial rules nor evidence that the vertical distribution agreements have harmed competition in any way.
"Most fundamentally, the Comcast Defendants are mere bystanders in this case," writes an attorney for Comcast, which figures to up its market power if given the go-ahead to acquire Time Warner Cable. "There is no dispute that the Comcast Defendants had no influence over the League rules and have simply agreed to purchase what the Leagues and clubs have offered. Moreover, nothing in these agreements prohibits out-of-market competitors from distributing content in competition with Comcast-affiliated RSNs."
In its own letter, DirecTV echoes these points, saying it "faces a take-it-or-leave-it offer to distribute television according to the Leagues' pre-established territories, or conduct no distribution at all…There is no evidence that DirecTV participated in any common plan or design to perpetuate territorial restrictions. Plaintiffs' principal argument is that DirecTV suppressed the distribution of games on the Internet. Again, no facts support the charge."